Santos and BG Group subsidiary QGC have agreed to connect the two pipelines that will feed their separate coalseam gas-to-LNG plants currently being built on Curtis Island in eastern Australia, marking the first major cooperation between the three projects under construction in the port city of Gladstone.
The agreement "supports plant operation flexibility and efficiency" for the life of both the Santos-led Gladstone LNG project and QGC's Queensland Curtis LNG project, Santos said in a statement.
The projects' major pipelines will be linked in two places, one in the CSG-producing region of central Queensland and one on Curtis Island. Construction of the two interconnect points is expected to be completed in 2014, Santos said.
"The interconnect points will enable gas to flow from one project to the other when necessary, for example to allow for LNG plant downtime and planned maintenance to occur without interrupting either project's gas field operations," said Santos Vice President GLNG Downstream Rod Duke. "Having two interconnects provides additional flexibility over the lifetime of both projects. It gives more options to the plant operators for moving gas," he added.
"Ultimately it means the two companies will be able to buy, sell and swap gas at these points during scheduled and unscheduled events, therefore maximizing plant productivity," Duke said. "The QGC and Santos GLNG agreement sets both projects up for the next 20 to 30 years and demonstrates our commitment to further enhancing cooperation between the two projects. We expect that this will be just one of many mutually beneficial arrangements across the industry in the future."
Local industry observers have been expecting moves to consolidate and cooperate among QCLNG, GLNG and the third project on Curtis Island, Australia Pacific LNG.
The 8.5 million mt/year QCLNG project is budgeted to cost $20.4 billion and is set to start producing in 2014. The 7.8 million mt/year GLNG project is expected to cost $18.5 billion and is due to start up in 2015.
The Australia Pacific LNG plant, operated by ConocoPhillips, will produce 9 million mt/year and is scheduled to ship its first LNG cargo in mid-2015. Australia's Origin Energy is the upstream operator of the APLNG project, which is expected to cost A$24.7 billion ($22.5 billion).
Origin agreed to sell Santos 365 petajoules (347 Bcf) of gas for the GLNG project in February this year, in a move that was seen as foreshadowing further consolidation among the players.
Santos' Duke flagged the pipeline deal last month, when he conceded to journalists that there had been some uneconomic duplication of facilities, such as loading jetties, at the three LNG projects. "The three projects were all looking for market share," when they were approved, but were now at a stage where less competition and more cooperation could take place, he said at the time.
A fourth LNG export project, the Shell and PetroChina-owned Arrow Energy, has also been proposed for Curtis Island. Rather than pushing ahead with another stand-alone project, however, Shell now appears to be favoring a deal to have Arrow's CSG processed by a third party.
